| Income Taxes |
INCOME TAXES
The following table provides details of income taxes:
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(Dollar amounts in thousands) |
Three months ended December 31, |
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Six months ended December 31, |
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2012 |
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2011 |
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2012 |
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2011 |
Income before income taxes |
$ |
144,874 |
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$ |
146,907 |
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$ |
321,416 |
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$ |
394,169 |
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Provision for income taxes |
$ |
38,244 |
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$ |
36,110 |
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$ |
79,419 |
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$ |
91,377 |
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Effective tax rate |
26.4 |
% |
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24.6 |
% |
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24.7 |
% |
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23.2 |
% |
The Company’s estimated annual effective tax rate for the fiscal year ending June 30, 2013 is approximately 26.0%.
Tax expense, as a percentage of income, was substantially equivalent during the three months ended December 31, 2012 to the Company's estimated annual effective tax rate.
Tax expense was higher as a percentage of income during the three months ended December 31, 2012 compared to the three months ended December 31, 2011 primarily due to the tax impact of the following items:
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The U.S. federal research credit expired on December 31, 2011. The federal research credit decreased tax expense by $2.6 million during the three months ended December 31, 2011;
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Tax expense was increased by $8.7 million during the three months ended December 31, 2012 due to a decrease in the proportion of the Company's earnings generated in jurisdictions with tax rates lower than the U.S. statutory tax rate; and
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Tax expense was decreased by $8.6 million during the three months ended December 31, 2012 related to windfalls from employee stock activity. The Company incurred a tax benefit of $3.5 million due to windfalls from employee stock activity during the three months ended December 31, 2012 compared to a tax expense of $5.1 million due to shortfalls from employee stock activity during the three months ended December 31, 2011.
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Tax expense was higher as a percentage of income during the six months ended December 31, 2012 compared to the six months ended December 31, 2011 primarily due to the tax impact of the following items:
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The U.S. federal research credit expired on December 31, 2011. The federal research credit decreased tax expense by $5.8 million during the six months ended December 31, 2011;
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Tax expense was increased by $7.9 million during the six months ended December 31, 2012 due to a decrease in the proportion of the Company's earnings generated in jurisdictions with tax rates lower than the U.S. statutory tax rate;
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Tax expense was decreased by $8.7 million during the six months ended December 31, 2012 related to windfalls from employee stock activity. The Company incurred a tax benefit of $3.5 million due to windfalls from employee stock activity during the six months ended December 31, 2012 compared to a tax expense of $5.2 million due to shortfalls from employee stock activity during the six months ended December 31, 2011;
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Tax expense was decreased by $4.7 million during the six months ended December 31, 2012 related to a non-taxable increase in the value of the assets held within the Company's Executive Deferred Savings Plan. The Company incurred a tax benefit of $2.2 million due to a non-taxable increase in the value of the assets held within that plan during the six months ended December 31, 2012 compared to a tax expense of $2.5 million due to a non-deductible decrease in the value of the assets held within the plan during the six months ended December 31, 2011;
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Tax expense was decreased by $18.3 million during the six months ended December 31, 2011 resulting from a decrease in the Company's unrecognized tax benefits due to the settlement of a U.S. federal income tax examination;
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Tax expense was decreased by $18.0 million during the six months ended December 31, 2011 resulting from a decrease in reserves for uncertain tax positions taken in prior years; and
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Tax expense was increased by $23.6 million during the six months ended December 31, 2011 related to a migration of a portion of the Company's manufacturing to Singapore.
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On January 2, 2013, President Barack Obama signed into law the American Taxpayer Relief Act of 2012, which reinstated the research tax credit retroactive to January 1, 2012 and extended the credit through December 31, 2013. As a result of the new legislation, the Company expects to recognize a tax benefit of $16.4 million during the three months ending March 31, 2013.
In the normal course of business, the Company is subject to examination by tax authorities throughout the world. The Company is subject to U.S. federal income tax examination for all years beginning from the fiscal year ended June 30, 2010. The Company is subject to state income tax examinations for all years beginning from the fiscal year ended June 30, 2007. The Company is also subject to examinations in other major foreign jurisdictions, including Singapore, for all years beginning from the fiscal year ended June 30, 2007. It is possible that certain examinations may be concluded in the next twelve months. The Company believes it is possible that it may recognize up to $1.7 million of its existing unrecognized tax benefits within the next twelve months as a result of the lapse of statutes of limitations and the resolution of examinations with various tax authorities.
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